Edited by: Li Zedong
According to CCTV News, The European Commission announced a new round of sanctions against Russia on July 15, including a ban on the import of gold from Russia, but it did not involve the much-concerned natural gas field.
According to the EU regulations, the European Commission's proposal needs to be unanimously approved by the 27 member states before it can officially take effect. Representatives of various countries are expected to discuss this proposal next week.
In addition, on June 29, Beijing time, the U.S. Treasury Department officially announced a series of new sanctions against Russia, including a ban on new imports of Russian gold .
According to national news, at the Group of Seven (G7) summit, the United Kingdom, Japan and Canada also voted in favor of this and will act in concert with the United States.
In order to bring down the Russian economy, can the West succeed in using new sanctions tactics?
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The West predicts that Russia will lose more than 10 billion US dollars
It is understood that Russia is one of the largest gold producers in the world. Western countries have high hopes of hitting the Russian economy through the gold ban.
The British government said in a statement that the economic benefits of exporting gold to Russia in 2021 would be as high as 12.6 billion pounds. This statement stated that since London is the world's major gold trading center, the British sanctions will have a huge impact on the Russian government's ability to raise funds.
U.S. President Biden also previously stated on social media that this move will bring unprecedented losses to Putin and prevent him from obtaining funds to maintain the Ukraine conflict . U.S. Secretary of State Blinken gave more precise figures in an interview with the media.
Blinken said that gold is Russia’s second largest export commodity after energy, and most of it flows to G7 countries. cutting off gold imports from Russia will reduce Russia's annual income by approximately US$19 billion.
However, according to Russian official data, Russia’s second largest export product is food. Moscow said that in 2021, the value of Russian agricultural products sold abroad exceeded $37 billion.
Despite this, the United States and other G7 countries believe that Western sanctions on banking, energy, aviation, high-tech and other fields have put tremendous pressure on the Russian economy, and blocking the gold market will further hit the Russian economy.
Will the gold ban really "crash" the Russian economy?
Although the top leaders of the United Kingdom and the United States have put down their "harsh words", there were many such "crying out" scenes when Western countries imposed sanctions on Russia's energy, finance and other fields. Nowadays, the effect of these sanctions is far less than expected.
Data from the Russian Central Bank shows that Russia’s current account surplus reached US$110.3 billion in the first five months of this year, 3.4 times that of the same period last year. The Russian Central Bank believes that the increase in current account surplus is mainly due to the increase in oil and natural gas export prices caused by Western sanctions against Russia. In addition, the Russian ruble's exchange rate against the US dollar and the euro is also at a seven-year high.
Many market participants pointed out that the symbolic significance of the gold ban is greater than the actual significance.
Picture source: Visual China VCG31N1233959126
One of the reasons is that this method is somewhat "old wine in new bottles". As early as March this year, the London Bullion Market Association (LBMA) had suspended the certification of six Russian precious metals refiners. Since then, newly produced gold bars in Russia have been unable to be traded on the world's most important gold market.
Vivek Dhar, a commodity analyst at the Commonwealth Bank of Australia, bluntly stated that this ban is largely just the formalization of previously adopted sanctions.
Warren Patterson, head of commodity strategy at ING, also said that given that the industry has already taken measures to restrict Russian gold, the impact of the G7 countries' ban on Russian gold imports this time may be quite limited, and is largely just Symbolic.
In addition, Russian Presidential Press Secretary Peskov said that the precious metals market has global and diversified attributes.As with all goods, if a good is illegally banned from a market, it will be redirected to other markets where there is demand. He emphasized that Russia will sell gold to countries with greater demand and more reasonable and legal economic systems.
Image source: Visual China VCG111389255505
The international gold price fluctuated at a low level during the year and has not changed
It is understood that gold has always been regarded as a tool to hedge inflation. History shows that gold typically performs well during periods of high inflation. World Gold Council data shows that in years when the inflation rate is higher than 3%, gold prices rise by an average of 14%.
But because precious metals do not earn interest, gold becomes less attractive to investors when other assets offer higher real returns. In the context of the Federal Reserve sharply interest rate response to inflation, rising interest rates and a stronger US dollar have adversely affected gold.
analysis believes that the market is relatively cautious under the current hawkish attitude of the Federal Reserve, and the overall gold price is still showing a volatile trend. However, in the medium to long term, the increasing downward pressure on the economy may support the demand for gold allocation.
Huatai Futures pointed out in a report that the current hawkish attitude of the Federal Reserve is still tough, and gold prices are also relatively difficult to perform as the Federal Reserve continues to tighten monetary policy. However, as the market's concerns about the future economic outlook gradually increase, the "safe haven" attribute of gold is expected to be highlighted.
Zhou Zhicheng, a precious metal researcher at Guantong Futures, also said that the Federal Reserve’s current cycle of interest rate hikes and interest rate cuts is much more violent and rapid than during the 2008 global financial crisis. In the long run, this may damage the competitiveness of the United States and the value of the dollar itself, and is conducive to the long-term rebound of gold prices.
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